These founders nailed every mark for a high-value exit

I keep thinking about this pair of co-founders who I talked to a couple months ago. They really had me saying, wow, you are well positioned for a sale. I’m Lexi Grant, and you’re listening to They Got Acquired.

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I’ve been reflecting on a conversation I had with two co-founders about selling their business. I do a lot of these calls. I do them for free. They really are the part of my week that I most look forward to.

I just love talking to founders about what you’re building. There’s always an interesting business I haven’t heard about — an idea that makes me say, “Wow, that’s so cool that someone thought of that.”

So I was talking to these founders about their business. And, you know, I’m going to leave all the identifying factors out of this conversation because, of course, whenever I talk to anyone, it’s totally confidential. But even looking at the high-level lessons, we can pull out some pieces that are helpful for all of us.

I left my call with these co-founders super impressed. And I was reflecting on this after the call — why was I so impressed with what they had built? I realized it’s because they had checked off four boxes that I go into these calls thinking I’m going to ask about. These are the things that help me get a sense of how ready a company is to sell, and how I can identify ways they can better position themselves.

This company had checked off all four boxes. Most founders I talk to have work to do on at least one or two — and sometimes on all four. So today I’m going to tell you what those boxes are and share ideas on how you can think about checking them off for your own business.

The first box these founders had checked off so beautifully was EBITDA. They were profitable. This sounds really simple, but I’m sharing it first because it’s the most important — and also the factor most founders underestimate.

I talk to a lot of business owners who want to share their top-line revenue. But what buyers really care about is your profit at the end of the day.

The second piece these co-founders had done really well was recurring revenue. Not all revenue is created equal. Buyers like predictability, and so should you as an owner.

Software companies are most likely to have recurring revenue — annual recurring revenue (ARR) or monthly recurring revenue (MRR). But content companies, e-commerce companies, and agencies can all develop recurring revenue streams as well.

This company I was talking to wasn’t a software company — it was an agency. A really interesting niche agency. But a lot of agencies don’t have recurring revenue models. Many work on a project basis. So whenever I see an agency that’s figured out how to build a recurring revenue model, that makes it so much more valuable.

From a buyer’s perspective, you want to have revenue coming in that you know is going to continue — month after month or year after year. Instead of having to win that business again, or constantly chase new projects, you already have predictable income.

That’s one reason software companies tend to be valued higher than other types of businesses — they usually have recurring revenue models. But if you can apply that mindset to your company, no matter what industry you’re in, it makes your business more impressive and more appealing to a buyer.

The third piece was the team. These co-founders had set up their team so that most of what needed to be done could be handled without them. They’d created a low founder dependency environment.

This is one of the things that can make a business unsellable. If you build a company that revolves entirely around you, it can make it hard to sell. A buyer might not want that business if it can’t run without you — unless they’re doing what’s called an “acquihire,” where they buy your business specifically to bring you in-house.

But in this case, these founders had built a strong team and set up systems so almost everything could be handed over easily to a buyer. They could step out of the picture.

Now, agencies often have earnouts — meaning some of the payout from an acquisition is held back and paid out over time. Typically, the founders stay on for a certain period to help the new owners hit milestones.

But if you’ve structured your business to run without you, you have so many more options when you sell. You may even be able to leave the company entirely if the buyer doesn’t need you after the transition.

That reduced founder dependency lowers risk for the buyer — and ultimately makes your company far more appealing.

The fourth factor that made this company appealing was growth trajectory. They had increased their revenue and EBITDA consistently over the last few years. When you looked at their growth graph, it was trending upward.

Growth is one of the biggest predictors of your sale multiple. Buyers want growth. They want to see that your company isn’t just doing well, but that it’s growing — and will likely continue that pattern after acquisition.

You want to sell your business when it’s still growing. That can feel counterintuitive — many founders want to keep riding that growth wave — and you should, to some extent. But it’s best to sell before that growth levels off. Growth has a huge impact on your valuation.

So this company had not only strong revenue and profitability, but also consistent growth — another critical box checked.

Now you can see why I was so hyped after talking to these founders. It’s really uncommon for owners to hit all of these marks at once.

As a quick review, the pieces we talked about today are:

1. Profit (EBITDA)
2. Recurring revenue
3. Reduced founder dependency
4. Consistent growth

So now I ask you: how would you score your business in each of these categories? Can you identify one or two to focus on in the coming months or years to make your business more appealing to buyers?

That’s all for today. Thanks for listening, and I’ll see you next time.